Category Archive: 5) Global Macro

The Middle Class Is Now The Muddle Class

The net result is the muddle class has the signifiers but not the wealth, power, capital or agency that once defined the middle class. The first use of the phrase The Muddle Class appears to be The rise of the muddle classes (Becky Pugh, telegraph.co.uk) in January 2007. The "muddle" described the complex nature of defining "the middle class," which includes education, class origins, accents, and many other financial, social and cultural...

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EM Preview for the Week Ahead

EM should continue to benefit from the generalized improvement in the global backdrop. Trade tensions have eased whilst the risks of a hard Brexit have fallen, at least for now. Yet recent developments in some major EM countries underscores how important it is for investors to differentiate between the strong credits and the weak ones.

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More Synchronized, More Downturn, Still Global

China was the world economy’s best hope in 2017. Like it was the only realistic chance to push out of the post-2008 doldrums, a malaise that has grown increasingly spasmatic and dangerous the longer it goes on. Communist authorities, some of them, anyway, reacted to Euro$ #3’s fallout early on in 2016 by dusting off their Keynes. A stimulus panic that turned out to be more panic than stimulus.

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The Inventory Context For Rate Cuts and Their Real Nature/Purpose

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process. An economy for whatever reasons slows down.

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Mexico vs. Brazil Near-Term Outlook

Both Brazil and Mexico are in a good position to benefit from the current improvement in market sentiment. However, when comparing the factors driving the currencies of both countries, we think there are relatively more near-term positives for the Mexican peso than for the Brazilian real.

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Three (Rate Cuts) And GDP, Where (How) Does It End?

The Federal Reserve has indicated that it will now pause – for a second time, supposedly. Remember the first: after raising its benchmark rates apparatus in December while still talking about an inflationary growth acceleration requiring even more hikes throughout 2019, in a matter of weeks that was transformed into a temporary suspension of them.

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The Inventory Context For Rate Cuts And Their Real Nature/Purpose

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process.

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The Political Parties and the Media Have Abandoned the Working “Middle Class”

Where is the line between "working class" and "middle class"? Maybe there isn't any. Defining the "middle class" has devolved to a pundit parlor game, so let's get real for a moment (if we dare): the "middle class" is no longer defined by the traditional metrics of income or job type (blue collar, white collar), but by an entirely different set of metrics:

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FOMC Preview

The FOMC begins a two-day meeting today with the decision due out tomorrow afternoon.  The Fed is widely expected to cut rates 25 bp for the third meeting in a row.  What’s next? US data have undeniably softened in September.  Weakness in the manufacturing sector appears to have spread to the wider economy.  ISM PMI, jobs, CPI, PPI, and retail sales all came in weaker than expected. 

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The Big Risks Left (and Right) In Europe

Another local election in Germany, another stunning defeat for the ruling center. How many more of these does anyone need before they realize the electorate is going to keep migrating toward the poles? And it all stems from the one reason; there is no and has been no economic growth. But because the so-called establishment has insisted the economy is booming, or it was, people are doing what people always do.

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Monthly Macro Monitor: Market Indicators Review

Is the recession scare over? Can we all come out from under our desks now? The market based economic indicators I follow have improved since my last update two months ago. The 10 year Treasury rate has moved 40 basis points off its low. Real interest rates have moved up as well but not quite as much. The difference is reflected in slightly higher inflation expectations.

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Dollar Firm as Two-Day FOMC Meeting Begins

The dollar continues to gain traction as the two-day FOMC begins; US political uncertainty has entered a new phase. Yesterday marked the third time that UK Prime Minister Johnson lost a vote for elections; he will try again today. Weak South Africa data support our call for imminent easing; the threat of sanctions against Turkey are back on the table.

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More Points For, And Pointing To, The Midpoint

It’s not surprising that the Census Bureau would report another weird sideways trend in wholesale sales. After all, the agency has already produced that kind of pattern in the related data for durable goods. For reasons that aren’t going to be explained, economic activity across the supply chain from producers to consumers has been curtailed. That hasn’t mean outright shrinking in seasonally adjusted forms, but it also doesn’t mean growth,...

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EM Preview for the Week Ahead

EM has been on a good run but this week will be a big test.  Brexit uncertainty may finally end.  Or it may not.  A delay would be positive for EM, whilst a potential hard Brexit would be negative.  The Fed meets Wednesday and key US data will be reported during the week, culminating with the jobs report Friday. 

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Somehow Still Decent European Descent

How times have changed. In the middle of 2018, we were told the risks to the global economy were all tilted to the upside. If central bankers weren’t careful, they chanced an uncontrollable inflationary breakout, the kind that would make the last few years of the 2010’s look too much like the 1970’s. Always eager to bottle up the inflation genie, Germany out of everyone actually welcomed negative factors as they built up during the year.

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Downward Home Prices In The Downturn, Too

The Census Bureau reported today New Home Sales remained at a better than 700k SAAR in September following the big jump over the previous few months. Though the number was slightly lower last month than the month before, it wasn’t meaningfully less. As discussed yesterday, while that might seem the Fed’s rate cut psychology combined with the bond market’s pessimism (reducing the mortgage rate) is having a positive effect, I don’t see it that...

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More Down In The Downturn

Flash PMI’s from IHS Markit for the US economy were split in October. According to the various sentiment indicators, there’s a little bit of a rebound on the manufacturing side as contrary to the ISM’s estimates for the same sector. Markit reports a sharp uptick in current manufacturing business volumes during this month.

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Macro Housing: Bargains and Discounts Appear

While things go wrong for Jay Powell in repo, they are going right in housing. Sort of. It’s more than cliché that the real estate sector is interest rate sensitive. It surely is, and much of the Fed’s monetary policy figuratively banks on it. When policymakers talk about interest rate stimulus, they largely mean the mortgage space.

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The Unraveling Quickens

Even if we don't measure the erosion of intangible capital, the social and political consequences of this impoverishment are manifesting in all sorts of ways. The central thesis of my new book Will You Be Richer or Poorer? is the financial "wealth" we've supposedly gained (or at least a few of us have gained) in the past 20 years has masked the unraveling of our intangible capital: the resilience of our economy, our social capital, i.e. our ability...

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August TIC: Trying To Get Collateral Out of the Shadows

The second most frustrating aspect of trying to analyze global shadow money is how the term “shadow” really applies in this case. It’s not really because banks are being sneaky, desperately maintaining their cover for any number of illicit activities they are regularly accused of undertaking. The money stays in the shadows for the simple reason central bankers don’t know their jobs; even after a somehow Global Financial Crisis in 2008, they don’t...

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